By on April 20, 2018

wells fargo

Wells Fargo is getting slammed with all kinds of penalties over shady business practices. Currently prohibited from growing its business as investigators look into its practices, the bank has restructured itself after it was implicated in widespread auto insurance and mortgage lending abuse in the summer of 2017. It’s also still coping with an earlier scandal involving local branches opening fake accounts for customers.

Last week, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency suggested Well Fargo pay $1 billion to “resolve” the governmental probes into those issues. That changed today when the bureau filed a consent order announcing it was time for the bank to pay up.

The fine applies to the mortgage lending issues, as well as Wells Fargo’s past practice of charging thousands of auto loan customers for insurance they didn’t need and often didn’t even know about. The move caused some borrowers to default on their loans, resulting in their vehicles being repossessed. The consent order mandates that the bank remediate those customers. 

The Consumer Financial Protection Bureau said it assessed a $1 billion penalty against Wells Fargo and credited a $500 million penalty collected by the Office of the Comptroller of the Currency toward the total fine.

While the fine is among the largest ever levied on a bank in the United States, analysts claim it won’t spell the end for the company.

“Operationally, Wells Fargo can recover, but reputationally and how a billion dollars will weigh on them — only time can tell,” Art Hogan, chief market strategist at B. Riley in Boston, told Reuters. “Companies have come back from worse than this but right now they’re still in the eye of the storm.”

Despite the bank’s shares taking a dive after the scandal became public knowledge in 2017, they appear to have stabilized somewhat within the last month.

Over 800,000 customers were believed to be affected by the auto insurance issue over roughly a four-year period. In August, Wells Fargo said it found that, in issuing auto loans, the bank charged some customers extra for collision insurance, even when customers already had it in their policy. President Donald Trump said federal agencies needed to go after the bank hard to set an example.

Afterward, the Federal Reserve mandated that Wells Fargo could not grow its business until it fixed its multitude of problems (and offered proof). The $1 billion penalty is the largest the Consumer Financial Protection Bureau has ever issued.

[Image: Ron Cogswell/Flickr (CC BY 2.0)]

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47 Comments on “Wells Fargo Fined $1 Billion For Auto Insurance Scandal, Mortgage Misdeeds...”


  • avatar
    tallguy130

    If an individual would sign someone up for financial products without their knowledge it’s identity fraud likely resulting in prison. If a company does it they can pay a fine (that will not cripple them) and go on their way.

    Think on that…

    • 0 avatar
      FreedMike

      You’re right, but here’s the problem: you can’t “jail” a company.

      I suppose you could shut it down, but if you do that, then the tens of thousands of employees who had nothing to do with this end up out of a job. That’s not right either.

      Unfortunately, monetary fines are the only thing that you can punish wrongdoers with. Sucks, but it’s true.

      • 0 avatar
        PrincipalDan

        But but… corporations are PEOPLE!

      • 0 avatar
        Garrett

        You can’t shut down a bank without causing more problems than it’s worth.

        Go watch “It’s a Wonderful Life”.

        Wells Fargo depositors can’t all go get their money back simultaneously. Before anyone gets upset about it, the practice of only keeping a fraction of your deposits on hand creates a tremendous amount of liquidity and contributes to borrowing costs that aren’t usurious.

        So what does the fine do? It will get passed along to its customers in ways that won’t harm its competitive position.

        • 0 avatar
          gmichaelj

          After posting about the relative size of the fine (below) I ran across this:

          https://www.reuters.com/article/us-usa-wells-fargo-fed/fed-orders-wells-fargo-to-halt-growth-over-compliance-issues-idUSKBN1FM2V9

          Turns out the Fed stepped in and put a cap on asset growth that will hurt Wells’ competitive position.

      • 0 avatar
        dantes_inferno

        > You’re right, but here’s the problem: you can’t “jail” a company.

        True. But the feds can take a page from Romania’s book and execute the executives and board of directors in similar fashion to Nicolae and Elena Ceaușescu. That would send a chilling message to any other organization contemplating such conduct.

    • 0 avatar
      gmichaelj

      A Billion Dollars sounds like a lot of money, but compared to the market value of the Compnay’s stock it’s a pittance.

      Wells is worth $250 Billion. So if you were worth $250,000, this would be the equivalent of a $1,000 fine.

      Think on that…

  • avatar
    sirwired

    Again, showing that Trump has the attention span of a gnat on Meth, I wonder if he’s even noticed that the agency that was in the forefront of the case, the CFPB, is an agency he’s done his level best to completely eliminate. (Appointing a director that submitted a budget request of $0 isn’t exactly subtle.)

    • 0 avatar
      Kenn

      Wealth transfer from the working poor to the rich. It goes well-beyond Trump; Republican congressmen have been angry about the CFPB since its inception under Obama. How can their supporters not understand this pro-business/anti-consumer intent? Oh, yeah: It’s about saving us from those “job-killing regulations.”

      • 0 avatar
        28-Cars-Later

        Jeebus. Its a pyramid scheme, they’re in the capstone, you’re in the 98% underneath, and in between is the mercantile/religious/medical/military class underneath. What we’re experiencing is re-feudalization. No agency of Senator Pocohontas’ design is going to change this, its existence is nearly pointless.

    • 0 avatar
      FreedMike

      It’s a bit more complex than that, and I say that as someone who works in the industry regulated by CFPB (and someone who you couldn’t pay to vote for Trump). The intent of CFPB was laudable, but many of the regulations are overbearing, and the agency itself has been more than a little heavy-handed.

      Does that mean the current approach is correct? No. What CFPB needs is refocusing, not being money-starved out of existence. Consumers desperately need some kind of advocate.

    • 0 avatar
      markf

      I didn’t know gnats used meth. I also assumed gnats have a short attention span to start with so why would they need meth?

      The CFPB is a heavy-handed agency who answers to no one. Its a self licking ice cream cone, finding reasons o exist. Cause the other 10k agencies under state and Federal Gov are not enough. Just ONE more to really “protect” us.

      • 0 avatar
        Kenn

        I don’t think the CFPB has to search very far to find plenty of reasons to exist. I’d guess Wells Fargo is just the tip of the iceberg when it comes to big business and fraud. The fact that Republican politicians have been so against the agency – from the time it was first proposed – says something about protecting corporate profits vs consumer protections.

    • 0 avatar
      Garrett

      Can you list the other relevant regulators that a bank has, and why none of them have the potential jurisdiction to take action?

      • 0 avatar
        sirwired

        The agency that regulates the non-consumer portions of a particular financial institution, (and all regulation prior to the CFPB) varies depending on how it was set up. So, if the bank has “N.A.” in the name, it’s under the Comptroller of the Currency. If it’s a Federal Reserve Correspondent bank, it’s regulated there, Credit Unions by the NCUA, and state banks by individual states.

        Different agencies provided different levels of supervision (some did a good job, others not so much), and had varying regulations. You’d think it would be lauded as a good thing by the GOP for this large area of supervision to be under a single regulator instead of a patchwork.

  • avatar
    manu06

    It’s called predatory capitalism . Using the company’s size and
    legal ability to extract money from the uneducated or unsuspecting .
    A massive skim operation. Upper management knows but keeps
    enough distance to prevent jail time.

    • 0 avatar
      Steve65

      It’s a pity we don’t have some sort of regulatory body which would prevent things like say, 25 major commercial banks merging and consolidating down to 4 over the course of the last 20 years. The would allow customers a modicum of genuine choice, and act as a hedge against these sorts of blatant abuses.

    • 0 avatar
      markf

      So when a bank won’t lend money to people its because they are “racists” or discriminating against the “Poor” when they do lend money it is “predatory”

      Make up your mind.

      • 0 avatar
        manu06

        It’s predatory because of forcing unneeded insurance on the loans. That’s why they were
        fined. If you look you will see that Wells Fargo owns a good portion of the insurance company.

  • avatar
    FreedMike

    Richly deserved.

  • avatar
    nlinesk8s

    I’m sure psychologists have a name for it, but it’s funny how a corporation reflects the values of its upper management.

    I don’t know the history of Wells Fargo. However, I guarantee the CEO and management who created the work environment of “meet goals or get fired”, coupled with “ask no questions”, is long gone with their golden parachute intact.

    • 0 avatar
      CaddyDaddy

      Hey. As long as Wells is in the position as a major owner of the Fed and keeps printing money out of thin air to fund our giant welfare, socialist war machine all is good!

      As far as I know, did this not happen all under the 8 years of the Obama administration? Answer, see comment above.

      How much of this will get down to those affected. Answer, 0.

      How many execs will lose their job, salaries or benefits. Answer, 0.

      Fines are cheap when it’s other people’s money. $1B is a rounding error for Wells.

      ……and the beat goes on. ……..

    • 0 avatar
      nlinesk8s

      Stumpf (know-nothing CEO), and Carrie Tolstedt (division chief responsible for the culture and practices).

      Both forfeited millions of pay and options. Both still left with a ton of money.

      Wells Fargo might survive; might not. I really hope they don’t. Like VW, they were doing things “better” than anyone else, and no one thought to look into why that was.

  • avatar
    jkross22

    Bank fines: A way for the government to appear it’s watching out for us but not actually doing anything to prevent the problem. The money doesn’t go to those hurt by this. The WF execs see it as the cost of doing business and aren’t held accountable. Same with the board of directors.

    Stockholders don’t care much either.

    The winner: US Treasury, WF stakeholders
    The losers: WF customers, tax payers, rule of law, accountability

  • avatar
    PrincipalDan

    I’m so glad my divorce (back in 2009) gave me good reasons to sever all ties with Wells Fargo.

    • 0 avatar
      FreedMike

      I had my own “divorce” from Wells as well…let’s just say without going into too much detail that everything that’s in the media now about their corporate culture doesn’t surprise me one bit based on my very short experience.

    • 0 avatar
      ernest

      I had 1st Interstate Bank for many happy years. When Worst Fargo bought them out in ’96 it wasn’t an upgrade for the customers. Within a few years I changed banks.

  • avatar
    doublechili

    New bureaucratic agency created in the executive branch. Agency enacts rules/regulations that have the force of law, even though the legislative power is not in the executive branch and the bureaucrats are not subject to limitations on term of office via democratic vote by the citizens. Agency then issues $1 billion fine against huge company for which the fine is basically a cost of doing business. None of that money goes to victims. Bureaucrats use money to grow bureaucracy, with likelihood at least some of the money filters to cronies of bureaucrats. Citizens applaud actions of bureaucrats looking out for them. Just like the Founders intended.

  • avatar
    CaseyLE82

    Closed all of my accounts there today. When I went in and told them the reason the girl I was working with just looked defeated and said “yeah, I understand.” No sales pitch, no nothing.

    • 0 avatar
      Nick_515

      Welcome to the club! I said as much when i quit years ago over the phone. I could almost ‘hear’ the defeated nods. And I have a lot of sympathy for out-of-school kids who get these entry bank jobs.

  • avatar
    05lgt

    Wells and BofA are both on my “do no business I can control with” list. Their customer is the board and to some extent the shareholders. Account holders and borrowers are “the public” and to be scorned and fleeced. Find a good CU. Own your money.

  • avatar
    87 Morgan

    I worked for WF for 5.5 years. I firmly believe the issues that are pervasive at WF and most likely the other large banks are a failure of the regulatory authorities in as much as they allowed the banks to get the size they are.

    We need regional banks. Yes, you get multiple people doing the same job, but they are decent paying jobs. IMHO we don’t need 5 or 6 large banks: Chase, WF, Citibank, BOA, I am sure I am missing one or two.

    The beast is too large and has an insatiable appetite for stock price appreciation which gets more and more difficult to achieve. I for one, would not be upset if a decision was made to systematically begin dismantling these too large banking conglomerates that have the capacity to tank our entire economy. Nothing should be that big. One guys opinion.

    • 0 avatar
      ktm

      Regional banks just won’t work in today’s world. I travel across the country quite frequently and internationally on occasion. When traveling cross-country, I can go to a BoA branch and withdraw money without a fee. I can transfer funds immediately to another BoA branch across the country instantaneously (just did a $10k transfer from LA to Port St Lucie, FL and my father had the funds immediately). Try that with regional banks…..

  • avatar
    geozinger

    During the Reagan administration, the policies and protections put in place by post Great Depression-era regulators were relaxed or erased. Some of them included that banks could not own insurance companies and strict limits on growth (or mergers). These men had seen what unregulated commerce could do to an economy (along with tone-deaf governmental policy). But that was in the 1930’s. By the 1980’s, all of those hard times had been forgotten, the people who wrote the policies were long dead…

    Add another 20 years to the calendars and we have the Great Financial Crisis, or Great Depression, Part Deux. In the wake of the GFC, the “Masters of the Universe”, who nearly destroyed our economy (as we knew it) received no real punishment. Our government, forced to keep them afloat, propped up these companies so their management could go on living their fantasy lives. While at the same time, the domestic car companies got billions in loan guarantees, and the general public scorned them, even though these same companies made up 7-10% of GDP and produced something tangible…

    With little regulation in place and political parties that grovel for money, what’s left to stop them? No real opposition, other than some scattered legacy regulations and maybe the CFPB… A billion bucks? Pocket change…


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